Clearer economic picture expected to boost equity markets in 2015

The Nation December 30, 2014 1:00 am

Experts believe that the equity market will do well next year following clearer recovery of the domestic and global economies compared to this year.

Meanwhile, the Stock Exchange of Thailand (SET) is looking at a more integrated region when the Asean Economic Community is launched this year by planning more cooperation with other exchanges in the region. Meanwhile, the Emerging East Asia local currency bond markets are resilient but a faster-than-expected US interest rate hike and a stronger dollar could pose problems in 2015, says the Asian Development Bank.

The SET Index has seen ups and downs this year, mostly due to external factors such as falling global oil prices, the US termination of its quantitative easing programme, and geopolitical risks in Europe, but the average return on investment in SET stocks is still at 20 per cent in 2014.

Pongpichet Nananukool, Kasikorn Asset Management's managing director, believes that the SET Index will hit 1,750 points with listed companies reporting average 15 per cent profits by the end of next year if the country's gross domestic product expanded by 4 per cent in 2015.

The SET revealed in November that companies listed on the exchange have reported a net profit of Bt614.41 billion from January to September, up slightly from 2013 while sales rose by 6.1 per cent to Bt8.58 trillion in the January-September period.

The SET also achieved key milestones to become Asean's No 1 exchange in several aspects such as the average daily trading value, which rose to Bt44.5 billion from January to November, the highest in Asean for three consecutive years.

Adithep Vanabriksha, the chief investment officer at Aberdeen Asset Management, said Thailand would see a decent pick-up in growth next year following a difficult 2014 and since the economy has turned the corner, there is potential for a modest upside for the stock market next year.

He said domestic investors, led by institutions, have now turned buyers in anticipation of a rebound in company earnings once the government's short-term stimulus package, as well as longer-term infrastructure spending, kick in next year. Helping the momentum in 2015 will be benign inflation, underpinned by low oil prices and positive trade- and current-account balances that should support the baht even as the US dollar strengthens.

"Thailand has understandably taken a rap abroad this year but the economy is poised to do better, its underpinnings being very solid. It's true the global recovery remains muted, and there are risks associated with the Federal Reserve's withdrawal of stimulus. There are also risks domestically if spending promises are not met," he added.

SET president Kesara Manchusree said in November that Thailand's economy in 2015 would see higher growth than in 2014, corresponding with the business growth in the Mekong Sub-Region and the upcoming AEC. This will improve product and service quality, improve liquidity, increase diversification and internationalise products and services, and enhance infrastructure and capacity to meet future requirements by launching new clearing services for equities in 2015 and expand digital listing services to cover all products.

The SET also aims to grow market capitalisation from initial public offerings by Bt250 billion and increase fundraising from existing listed securities by Bt130 billion with expectations to boost average daily derivatives trading to 190,000 contracts in 2015.

As for the bond market, the ADB's latest Asia Bond Monitor has revealed that higher US rates and a stronger dollar could prove to be a challenge for Asian bond markets next year given increased foreign holdings of Asia's bonds, which could